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  • Writer's picturePhysicians Financial Design

Let's Talk RVUs!

Introduction to RVUs

If you are a resident, fellow, or new attending physician, there is a good chance you don’t yet fully understand the system known as RVU-based compensation. Residents and fellows are generally paid a fixed salary and many new attendings are guaranteed a salary despite their lack of productivity as they build their new practice and patient panel. However, experienced attending physicians are usually on an RVU-based compensation contract if they are employed by hospitals or other healthcare organizations, including academic medical centers, community health centers, and large medical practices. The use of RVUs has become more widespread in recent years, and it is now commonly used to determine payment for many physician specialties, including primary care, surgery, radiology, and others. Understanding how you will get compensated once you transition into this model is imperative for your financial and professional success.

So What’s an RVU Exactly?

Relative Value Units (RVUs) are a way of measuring and comparing the value of medical services based on the resources needed to provide them. RVUs are designed to measure the time, effort, skill, and intensity required to perform a particular service. RVUs are assigned to each service or procedure code by the Centers for Medicare and Medicaid Services (CMS) based on recommendations from the American Medical Association's Relative Value Update Committee. Once the RVUs for each service or procedure have been determined, they are multiplied by a conversion factor to determine the payment amount. The conversion factor is a dollar amount that is set annually by CMS and represents the relative value of one RVU in dollars. In addition to the RVUs and conversion factor, Medicare payments are adjusted for geographic location to account for differences in the cost of providing healthcare services in different parts of the country. All this information is combined to make a formula that determines how much you’ll be paid based on the services you provide as a physician.

The Benefits of RVU-based Compensation

Transparency: RVUs provide a transparent way of measuring the value of medical services based on the resources needed to provide them. This transparency can help to ensure that physicians are fairly compensated for their work, reduce the potential for disputes, and help eliminate biases.

Incentivization: Because RVUs are based on the volume of services provided, an RVU-based compensation system can provide incentives for physicians to be more productive and provide more services. This also can help align the goals of the medical practices or healthcare organizations with physicians as they seek to increase patient volume and revenue.

Flexibility: An RVU-based compensation system can be flexible and can be adapted to the needs of different specialties and medical practices. This allows for greater customization of compensation plans and can help to ensure that physicians are fairly compensated based on the unique demands of their practice. This can also allow physicians to potentially work less or more hours based on their income goals.

A Major Drawback of RVU-based Compensation

The conflict between quality of care and hitting RVU numbers is a common issue that many physicians face. On one hand, physicians want to provide the best possible care for their patients, which often requires spending more time with patients, ordering additional tests or procedures, and taking other steps to ensure that patients receive the appropriate care. On the other hand, physicians are often incentivized to meet certain RVU targets, which can conflict with their desire to provide high-quality care.

This conflict can create internal tension and stress for physicians. They may feel pressure to see more patients and spend less time with each patient in order to meet RVU targets. This can lead to feelings of guilt, burnout, and dissatisfaction with their job.

At the same time, physicians also recognize the importance of hitting RVU targets. RVUs are often tied to compensation, bonuses, and other incentives, and hitting RVU targets can be an important factor in career advancement and job security.

To resolve this conflict, physicians need to find a balance between providing high-quality care and meeting RVU targets. This may involve finding ways to be more efficient in their work, such as using technology to streamline documentation and improve workflows. It can also be partially alleviated by some good financial planning and preparation as described in further detail below.

Navigating the Transition

Moving into an RVU-based compensation model comes with many potential challenges for physicians. It’s important to prepare accordingly. Here are a few suggestions on ways to successfully navigate this transition and enjoy peace of mind regarding your professional and financial outlook.

Understand the System: It's important to have a basic understanding of how RVUs work and how they are calculated. You also need to learn and digest how your organization calculates RVUs and how they are used to determine compensation. This may include understanding the RVU benchmarks for your specialty, how RVUs are adjusted for geographic location, and how RVUs are used to determine bonuses and incentives.

Understand Your Situation: Determine your current compensation, how you're currently being compensated, and how it compares to RVU-based compensation. Then you’ll want to gather data on your current productivity to estimate your future compensation. This includes information such as the number of patients you see, the procedures you perform, and the time you spend on each activity. This will give you a baseline to work from and help you determine whether you can add efficiencies into your workflow to increase productivity. You may also use this info to help you negotiate a new compensation package if you feel it is justifiable.

Understand Proper Coding: Coding plays a critical role in RVU-based compensation, as it's used to capture the work that physicians perform and to calculate the associated RVUs. Accurately coding the work that physicians perform is vital to ensuring that RVUs are calculated correctly. If the coding is inaccurate, it can result in underpayment. To accomplish accurate and efficient coding, you may want to speak with your employer about additional training and support that may be available or even ask if they could audit your recent coding practices to see if money is being left on the table. Remember, the more RVUs you can bill, the more revenue your employer will be collecting as well.

The Planning Effect

Finally, it’s important to remember that financial preparation for RVU-based compensation is a key to achieving (or keeping) your financial peace of mind during this phase of your career. Many clients come to me with anxiety over the prospect of losing income once they no longer have a guaranteed salary. However, with a financial plan in place that covers these contingencies, we are usually able to eliminate those fears and create an achievable path that brings a sense of calm right along side it. So, with that said, if you feel you would benefit from having these discussions and creating your own personalized path towards financial peace, don’t hesitate to click on the big yellow button at the bottom of the page and find out what Physicians Financial Design is all about!

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